Colorado state law requires voters to approve municipal broadband systems – a simple vote by the city council isn’t enough. According to the Washington Post, voters in 7 cities and counties voted to approve it…

In Boulder, locals voted on whether the city should be “authorized to provide high-speed Internet services (advanced services), telecommunications services, and/or cable television services to residents, businesses, schools, libraries, nonprofit entities and other users of such services.” As of late Tuesday night, the city of 100,000 people, which already owns miles of unused fiber, had approved the measure with 84 percent of the vote.

Similar overrides also passed by large margins in the towns of Yuma, Wray, Cherry Hills Village and Red Cliff and in Rio Blanco and Yuma counties, according to KUNC, a public radio station in northern Colorado.

The story also spins Colorado’s muni broadband law as a prohibition, of the sort that FCC chair Tom Wheeler says he’s against. I’d be the last person to speculate on what thoughts are actually crawling through Wheeler’s brain, but I think the Post has it wrong. Requiring local voter approval as a first step in building a muni broadband system should be a boost, not a barrier.

If 80 percent or more of local voters say they want something, the political debate – which will tie up muni broadband for years – is over. City elected officials have their marching orders. It’s a matter of putting the best possible plan together. Since any substantial broadband build will require borrowing capital, the final step is asking voters to say yes or no to the specifics. Or at least something a bit more specific – Colorado cities aren’t famous for full disclosure on bond issue votes.

Get it on the ballot and either move ahead or move on. That looks more like a fast track than a failure for viable muni broadband projects.

Seattle voters yesterday turfed out mayor Mike McGinn, their broadband cheerleader-in-chief, giving the job to state senator Ed Murray by a preliminary margin of 56% to 43%. It was a different story in the Rocky Mountain town of Longmont, where residents overwhelmingly approved a fiber-to-the-home bond measure, 68% to 32%.

By contrast, the muni FTTH campaign in Longmont was poker-faced. The city showed just a couple of cards on the table, giving voters a summary powerpoint presentation and a promotional brochure rather than a bona fide business plan. They’ll get to see it after the fact, though. To sell the bonds, the city is required to publish detailed disclosures about its new broadband business and its existing electric utility. Both are important because if FTTH cash flow falls short, bond payment charges will be tacked on to residents’ electric bills.

The lop-sided result in Longmont shows that whether or not they completely understand the risk, voters enthusiastically accept it. Because they’re putting real money on the table, it’s very likely an FTTH system will be built. That’s not what I expect for Gigabit Seattle, which relies on hope and hype rather than cash.

Judging by the lack of ripples in cyberspace, the upcoming $45 million broadband bond election in Longmont, Colorado is not generating a boisterous debate. Granted, it’s difficult to gauge Rocky Mountain political temperatures from beachside in California, but signs of passion, pro or con, are few.

Are my electric rates expected to increase to repay this bond?No. Although the bonds are backed by the LPC enterprise fund in order to obtain favorable interest rates, the electric and broadband operations are independent from an accounting perspective. The broadband feasibility study shows solid financial viability and that broadband revenues will be sufficient to cover all of the costs associated with providing the broadband services.

The city gets “favorable interest rates” because bonds backed only by broadband revenue are reckoned to be particularly risky, with interest rates running two to three times higher. As residents of Provo discovered, broadband bond payments backed by electric service revenue do end up on electric bills when the business model turns sour, even if Google steps in and buys what’s left. The city has kept the details of its feasibility study under wraps, but the summary presentation it released appears to rely on optimistic take rate assumptions with no provision for the inevitable competitive backlash from Comcast and CenturyLink, the same two major incumbents that successfully contested Provo’s system in the marketplace.

As Google Fiber takes the reins in Provo, Utah, the city council in Longmont, Colorado is heading to the ballot box to, essentially, ask voters if they want to follow the same path. At least as far as using city electric bills as collateral.

The Longmont council voted in May to move ahead with plans to build a fiber-to-the-home system, leveraging an existing – and successful – municipal dark fiber business. Last week, council members looked at the available financing options. They could have decided to try to self-fund the project out of current dark fiber profits – about a quarter million dollars a year – but with construction costs estimated in the $35 to $40 million range and early FTTH operating losses a certainty, it would have taken a long, long time to complete the project.

So they decided to borrow the money – $44 million including interest and overhead – hoping that the FTTH system will generate enough cash flow to pay it back, but planning to pay with revenue from the city-owned electric utility if it doesn’t. Voters have to approve, and sometime this month the city council will set a date for an election. There’s already a city election scheduled for November, so that’s a possibility.

When Provo built its FTTH project, it also backed its bonds with its municipal electric utility. FTTH revenue fell far short of making the payments, so now Provo residents have an extra $5.35 per month tacked on to their electric bills, whether they use the system or not. Even that wasn’t enough to keep the system afloat, so Provo City sold it to Google for a couple of bucks.

Provo was lucky to have the Google option available, else the monthly tab would likely have gone higher. As it should be, it’ll be up to Longmont voters to decide if they want to make the same entrepreneurial gamble with their own electric rates.

The Longmont, Colorado city council settled for a staff report and a powerpoint presentation that summarized the results of a feasibility study, before voting unanimously to take the next step toward building a municipal fiber-to-the-home system. The nitty-gritty details – business model, raw research data, quantitative analysis and the like – are being kept out of the public domain for now.

The report asked the city council to allow staff to continue moving ahead with work on the project, and in particular to give the city’s finance director permission to develop a financing plan, based on various debt options. The bottom line, according to staff, is that…

Debt service repayment will come from the broadband services revenues. Details on financing will be presented at a future council meeting.

In other words, the assumption going forward is that once the system is up and running in something like three years, it will generate enough operating profit to repay the debt incurred to build it. Other municipal FTTH and cable systems – including Provo City and Utopia in Utah and Alameda in California – have gone ahead on that assumption but did not attract sufficient subscribers. The Utah projects have market penetration in the 15% to 20% range, while in Alameda the city’s share went as high as 30%, before slipping back due to intense competition. Longmont is counting on a 36% take-rate.

Three debt options are on the table: lease-back financing secured by city property, bonds backed by revenue from the city’s electric utility or bonds backed by sales tax receipts. If Longmont’s FTTH financial projections are correct, the system will be self supporting. If not, lenders will get any revenue or property offered as collateral.

The city council in Longmont, Colorado considers today whether to move ahead with plans to build a municipal fiber-to-the-home system. They’ll be reviewing a feasibility study prepared by a consulting company and then deciding whether to direct city staff to come up with a financing plan.

Longmont is near Boulder, in the Denver area. The city runs its own electric utility, serving about forty thousand households, and has a backbone fiber optic network that was installed about fifteen years ago to support utility operations. Since then, a handful of dark fiber customers have signed up, generating about a quarter of a million dollars a year for the city. A couple years ago, voters decided to use that money to finance connections for businesses willing to pay a connection fee that can run into thousands of dollars.

The plan that’s under consideration now would eliminate connection fees and build out the system to the entire city, homes and businesses alike.

The full feasibility study isn’t public yet, but a summary presentation has been released ahead of the meeting. The numbers indicate that the business plan is built on the assumption, drawn from a survey of 400 homes, that 36% of residents will sign up for Internet service and 20% for telephone service. No television service would be offered.

Judging from the information in the slide deck, the city would try to compete with Comcast and CenturyLink primarily on the basis of price, rather than superior service levels. Only 17% of households surveyed showed any positive desire to upgrade Internet speeds. On the other hand, 68% would be interested in switching providers in order to lower their Internet bills, which average $44 a month.

There’s no consideration given in the presentation to the inevitable competitive response from the incumbents, who are quite capable of lowering prices and leveraging telephone and, particularly, video bundles. The research shows a high degree of affinity for the city’s electric utility, but that’s a minor consideration for consumers when picking a service provider. Price, reliability and speed matter far more.

Identifying a market opportunity and successfully competing to serve it are two completely different beasts, particularly when your competition has a head start of months, if not years. I’ll look forward to reading the complete report, but I’m not impressed by what I’ve seen so far.